ContextLogic (WISH) stock has been volatile since its listing in 2020. The stock fell to a 52-week low after its dismal second-quarter earnings. It recovered somewhat amid a Reddit short squeeze, but has weakened again. What’s the 2025 forecast for WISH stock, and is it a good long-term investment?
WISH stock is still among the top discussion topics on Reddit group WallStreetBets. Traders on the group have been instrumental in triggering short squeezes in several stocks. However, such squeezes are just short-term price drivers. Over the long term, stock tends to move in tandem with the company's earnings.
ContextLogic's earnings have been volatile
Earnings haven’t been a strong point for ContextLogic stock. The company's IPO filings revealed uneven growth and perennial losses, which have continued even after its listing. While losses are not unusual in the e-commerce space, the company's uneven revenue growth has been intriguing considering that the industry has been experiencing an uptrend.
WISH reported its second-quarter earnings on Aug. 12. Both the company's earnings and guidance were a big disappointment, and its operating performance wasn’t great, either—its active buyers, daily active users, and user retention also fell in the quarter.
WISH stock's long-term forecast
While ContextLogic stock could remain volatile in the long term, it shouldn't be written off. The e-commerce industry's long-term forecast looks promising based on its sales growth as a percentage of total retail sales.
As we can see in EVs (electric vehicles), while the industry is growing quickly, not all companies will succeed. Like in the EV industry, where legacy automakers are focusing on EVs, in the retail industry, brick-and-mortar retailers are investing to ramp up their e-commerce capabilities.
WISH stock's 2025 forecast
Analysts expect WISH to report revenue of $2.27 billion in 2021, and then for it to rise 4.6 percent to $2.37 billion in 2022. If the company can grow its revenue by 10 percent between 2022 and 2025, it would report revenue of $3.15 billion in 2025.
Currently, ContextLogic has a market cap of $4.2 billion and an enterprise value of $2.65 billion, which would mean a 2025 enterprise value-to-revenue multiple of 0.84x. Even if the company’s sales increase by a low-single-digit percentage between 2021 and 2025, it would have a 2025 enterprise value-to-sales multiple of below 1.
The company is taking several measures to improve its performance but does not expect short-term results. It's changing its platform to focus on social e-commerce, which it believes would add long-term value. It's also cutting down on advertising expenses, working on retention, and improving the experience for its current user base.
ContextLogic's focus on sustainable and consistent growth seems like the correct strategy—if the company can improve its operating performance, it would then trickle down to its financial performance. Investors will just have to be patient, as these efforts may only appear in the medium to long term.